Brent Kelly
Brent Kelly is president and principal analyst at KelCor, Inc., where he provides strategy and counsel to key client types...
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Brent Kelly | October 27, 2014 |


Voice for Office 365: SMB Options Grow

Voice for Office 365: SMB Options Grow TCO modeling shows a cost-effective potential for Office 365 users looking to provide PSTN connectivity for Lync users.

TCO modeling shows a cost-effective potential for Office 365 users looking to provide PSTN connectivity for Lync users.

I have used Microsoft Office 365 for several years because I find the services it provides of high value to my business for the price I pay -- email (Exchange), UC (Lync), storage (OneDrive), and business applications (Word, PowerPoint, Excel, and so on). I would like to be able to add telephony to the list, via Lync connectivity to the PSTN, but Microsoft has not delivered this capability... yet.

As announced at Lync Conference 2014 in March 2014, Microsoft is working on providing this long-awaited PSTN connectivity. However, it hasn't provided specifics about functionality or pricing. While I await more information, I've been reflecting on what small businesses who use Office 365 are doing for their telephony services.

A few months ago, I was briefed by AudioCodes about its new on-premises device that offers all of the required Lync server, software, and interconnection capabilities for providing Office 365 users with voice connectivity to the PSTN. The concept behind the product, called One Box 365, is that it would appeal to the small and medium-sized business (SMB) that is using Office 365 for email, Lync UC, and the Microsoft office suite (these capabilities are bundled in the Office 365 Enterprise E3 plan). With One Box 365, E3 subscribers could upgrade to the Office 365 E4 plan for two additional dollars per user per month and get full PSTN voice interconnectivity for all of their users.

My initial reaction in hearing about this product offering was that it would make a lot of sense for SMBs. However, I tempered my enthusiasm because I knew, based on some earlier modeling work I'd done with my industry colleague Marty Parker, principal of UniComm Consulting, that on-premises solutions generally cost more than cloud-based deployments for organizations with fewer than 500 users. We have created a fairly sophisticated model for comparing Lync on-premises deployments to Lync cloud-based deployments using Office 365 along with figures from a cloud-based voice provider that integrates PSTN connectivity with Office 365 users. It became readily apparent to us after looking at the five-year total cost of ownership (TCO) that a hosted or cloud-based version of Lync is the less expensive option for organizations with fewer than 500 users.

After AudioCodes announced pricing for One Box 365, Marty and I decided to put the pricing data into our modeling program to get a sense as to whether One Box 365 would be compelling to SMBs from the TCO perspective. As part of our analysis, we decided to compare four different deployment scenarios for organizations with 50, 100, and 200 users:

  1. A full Lync on-premises deployment in which the company buys all of the required hardware, the Microsoft server licenses, the client access licenses (CALs), and the SIP trunks for PSTN interconnectivity.
  2. A hybrid Office 365 E3 plan along with the outright purchase of the Lync Plus CAL and the on-premises Lync servers, software, and SIP trunks for PSTN connectivity.
  3. A hybrid Office 365 E3 plan upgraded to the E4 plan coupled with the purchase of AudioCodes One Box 365 and the SIP trunks for PSTN connectivity.
  4. A hybrid Office 365 E3 plan upgraded to the E4 plan coupled with a hosted Lync voice service.

The TCO results are quite telling, as illustrated in the figure below.


As compared to either of the do-it-yourself on-premises solutions, which are the blue and orange bars in the figure, the Office 365 plus One Box 365 solution (the yellow bar) is significantly less expensive at each company size tested. It's interesting to note that as the size of the organization gets larger, the cost advantage of One Box 365 decreases. This is consistent with our earlier findings for sub-500 user organizations.

The One Box 365 offering is also less expensive than the hybrid Office 365 plus hosted Lync voice offering down to 50 users. The amount of this TCO difference decreases as the number of users shrinks because there is a fixed minimum cost for the One Box 365 hardware regardless of the number of users.

This analysis, which we did independently from AudioCodes using our existing model, shows that SMBs that are either already using or are considering using Office 365 have a compelling option for enabling Lync users with full PSTN interconnectivity.

As I present these numbers, it is not my intent to suggest that Office 365 is the right voice solution for everyone, or that One Box 365 is either. This hybrid solution is certainly not the equivalent of the PBX nor does it provide all of the functionality that most PBXs provide. My intent is simply to suggest to those SMBs who are considering Office 365 or to those who are now users of Office 365 that the AudioCodes One Box 365 on-premises offering is worth considering if they wish to provide PSTN connectivity for Lync users.

While we do not yet know what Microsoft itself will offer for Office 365 voice service, it is safe to say that it will not be more functional than One Box 365, which contains a full version of Lync. Once Microsoft announces details on its own solution along with pricing and functionality, it will be interesting to see how it compares with the hybrid Office 365 + One Box 365 offering.


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